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With the pandemic increasing the rate of hospitalization, critical illness insurance plans have become a necessity. In fact, the pandemic has also increased the demand for health insurance. However, health insurance premiums have been rising even with the increasing demand. Several policyholders have noticed their premiums have increased manifold upon renewal. So, what can be the possible causes for the hike in health insurance premiums? Let’s find out!
Increased Claims Because Of COVID
Medical insurance companies have registered high claim volumes because of the pandemic. Until October 30, 2020, insurance companies registered the aggregate claim bill of medical insurance policies, going by the data provided by the GIC (General Insurance Council). The demand for health insurance plans was also pushed over fifteen percent due to the pandemic. Because of the high claim volume, health insurance companies had to increase the premium rates for ensuring solvency and profitability.
High Medical Inflation
Medical inflation goes on rising every year due to the increasing cost of treatments and medicines. Reports suggest that back in the financial year 2017-18, medical inflation was 4.39 percent and that increased to 7.14 percent in 2018-19.
In the two financial years, inflation in nursing and hospital charges increased to 9.4 percent in 2018-19 and 6.5 percent in 2017-18. The increasing inflation has made the health insurers witness a large volume of claims that has risen the premium rate.
Wider Insurance Coverage
The Insurance Regulatory and Development Authority of India (IRDAI) has issued mandates for insurers to widen the scope of insurance coverage. Treatments for illnesses like mental health disorders, COVID-19, and so on are now a part of many medical insurance plans. With the scope of the policies widening, medical insurance companies have to deal with the chances of higher insurance claims. Therefore, they have to increase their premiums to compensate for this wider coverage.
Greater COVID Risk for Individuals with Comorbidities
Insurance companies are also having to face greater risks because individuals with comorbidities like hypertension, diabetes, and the likes are more likely to have COVID-related medical complications. Thus, the hike in insurance premium is more focused on individuals with comorbidities or smokers because they are at greater risk in the COVID situation.
Level Insurance Premium in Similar Age Brackets
Many insurers charge the same premium for individuals who fall within the same age bracket, such as 31 to 35 years or 36 to 40 years. Your premium might stay the same so long as you remain in one age bracket and change when you move to the next age bracket. Moving to the next age bracket might lead to a higher change in premium due to the medical insurance company’s claim experience.
The factors mentioned above, along with the raging pandemic, have led to a rise in health insurance premiums rates. So, in case you renew your policy and notice a higher premium being charged, you now know the reasons behind the situation. The insurers are trying to bring you the best products while ensuring they don’t run in losses.